Philips posts first profit in 20 months

BLOOMBERG

Royal Philips Electronics NV, Europe's largest consumer-electronics maker, yesterday reported its first profit in five quarters as cost cuts outweighed an 18 percent drop in sales and the company didn't repeat a writedown.

Net income was 42 million euros (US$47 million), compared with a loss of 1.36 billion euros in the year-earlier period, Philips said in an e-mailed statement.

Philips chief executive officer Gerard Kleisterlee has shed more than a fifth of the company's workforce, moved production to countries with lower labor costs and reined in spending to help return the company to a profit after two straight years with record annual losses.

"Currency movements may continue to impact sales and to a lesser extend net income," Kleisterlee said in the statement.

"Should low consumer confidence in major markets continue, it will have an impact on the sales of consumer electronics," he said.

Amsterdam-based Philips had been expected to say second-quarter propped 17 percent to 6.65 billion euros, according to the average estimate of 18 analysts surveyed by Bloomberg News.

The announcement came before the start of trading. Before yesterday, Philips shares had gained 12 percent since the start of the year, compared with a 4.2 percent drop for the benchmark Amsterdam AEX Index.

The company's consumer electronics division, its largest business by sales, had a second-quarter operating loss of 42 million euros, from a 27 million-euro profit in the year-earlier period. Sales for the unit fell 18 percent to 1.98 billion euros.